Reading Corporation Is Considering an Investment Opportunity with the Following

question 70

Essay

Reading Corporation is considering an investment opportunity with the following expected net cash inflows: Year 1,$250,000; Year 2,$350,000; Year 3,$395,000.At the end of Year 3,the residual value of the investment would be $50,000.The company uses a discount rate of 12%,and the initial investment is $400,000.Calculate the NPV of the investment.
Present value of $1:
$$\begin{array} { | c | c | c | c | c | } \hline & 11 \% & 12 \% & 13 \% & 14 \% \\\hline 1 & 0.901 & 0.893 & 0.885 & 0.877 \\\hline 2 & 0.812 & 0.797 & 0.783 & 0.769 \\\hline 3 & 0.731 & 0.712 & 0.693 & 0.675 \\\hline 4 & 0.659 & 0.636 & 0.613 & 0.592 \\\hline 5 & 0.593 & 0.567 & 0.543 & 0.519 \\\hline\end{array}$$

---

Definitions:

Hot Water Heater

A household appliance that heats water above its initial temperature for uses such as cooking, cleaning, bathing, and heating.

High-Wattage Bulbs

Light bulbs with a higher power consumption and output of light, often used in areas requiring bright illumination.

Unused Or Expired

Referring to products or materials that have not been used by their expiration date, potentially leading to their ineffective or unsafe use.

Medication Use

The act of consuming drugs or prescriptions as therapy for managing or treating health conditions.